Chart of the Day: Waning Confidence
By Lance Roberts, CEO, StreetTalk Advisors
Yesterday morning my friend Tyler Durden posted a chart showing the Bloomberg Consumer Confidence index versus the S&P 500. That poll, released yesterday showed a continued drop in consumer comfort to -47.4 reading. Consumer confidence and sentiment on most all measures remain mired at recessionary levels which has been reflected in the sub-par economic growth rate since the last recession.
The Bloomberg Consumer Comfort index fell a steep 3.0 points in the August 19 week for the sixth decline in a row and the lowest reading since December. The assessment of the economy declined 1.7 points to -77.3 which is at its lowest level since January. Personal finances fell 4.8 points to -15.9 and is at its lowest level since November. The very weak readings for personal finances do not point to future increases in discretionary spending which is a big negative for retailers where many have already missed earnings and revenue numbers and given weak future outlooks even at the lowest end of the retail scale. The buying climate reading was down 2.5 points to -48.9 for the lowest reading since January.
The Rasmussen indexes on the Consumer, Investor and Employment likewise have all declined in like fashion over the past several months as the market has remain detached from the underlying fundamental and economic realities in ”hopes” that the promises of further QE will be fulfilled. (See here for why this not likely the case soon.)
The chart of the day shows the S&P 500 compared to the Rasmussen polls and the Bloomberg Consumer Comfort Index. As you will see these indexes tend to lead the overall market by a couple of months.
The question is simply either the market is soon to come to grips with the underlying realities of the economy and fundamentals or, as Irving Fisher once stated, “stocks have now reached a permanently high plateau.” Are the indexes once again predicting a market top? That is for you to decide.
3 Comments
I’d be inclined to question your interpretation of the chart “leads by a couple of months”.You’ve got one market top that supports that statement. Since the last market bottom was made all it shows is that thei central bank inspired cycle remains the most unloved by investors and remains the least consumer inspired in decades and we all know why the latter is the case since the underlying problem was debt.
I see no value added in the chart because the cycle has been built regardless of the indicators chosen and as only caused pain so far to any that opted to fight the central bank.
There once was a time to “fight the Fed”. That was the period from October, 2007 through September, 2008. Even though the Fed then was doing everything in its power to stop the onset of the ’08 crisis, with numerous reassurances along the way that the “crisis was contained”.
An additional “Take” and more research on “consumer confidence”
http://www.zealllc.com/2012/spx20122.htm